In the first quarter, Samsung lost global market share in smartphones for the first time in four years, falling to 31.2% from 32.4% a year earlier and ceding ground due to competition from companies like
Lenovo Group Ltd.
and Huawei Technologies Co., according to market research firm Strategy Analytics. (
Apple Inc.
also saw its market share dip, to 15.3% from 17.5%.)

Samsung's phone business generates more than 70% of the company's operating profit, putting Co-Chief Executive
J.K. Shin,
who oversees mobile products, under pressure to reverse the slide with new hardware and software features. In February, Samsung unveiled the Gear 2 smartwatch, which runs on the homegrown Tizen operating system. To expand beyond the consumer market, it has been pushing its Knox mobile-security system to businesses and governments around the world.

In an interview at Samsung's headquarters outside Seoul, the 58-year-old Mr. Shin discussed the latest flagship smartphone, the Galaxy S5, and how he is trying to stay ahead in the mobile business. Edited excerpts:

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WSJ: How do you plan to counteract slowing growth for your smartphone business?

Mr. Shin: My biggest goal is exploring new opportunities in emerging categories such as wearables and enterprise mobility [offering mobile devices and software to corporate clients], while further strengthening the lineup of premium and mid-to-low-end phones. I am also carefully looking at consumer demand to see where there are unmet needs.

WSJ: Critics have said the Galaxy S5 lacks innovative features. What distinguishes the phone?

Mr. Shin: Galaxy S5 is the only water-resistant smartphone with a detachable back cover on the market. We redesigned all of the components and applied new materials—from the back cover, USB port, earphone jack, touch screen and even the antenna inside. We experimented with an array of materials and hardware designs until we reached the current design. The power-saving mode was possible because of Samsung's OLED [organic light-emitting diode] display which doesn't require an additional backlight.

WSJ: How are your phones faring in the U.S., where there is fierce competition with Apple?

Mr. Shin: There is somewhat of a sentiment toward the rival's [Apple] products. But our market share in the U.S. has been rising and will rise more going forward. We monitor our market share there on a weekly basis. Shipments of the Galaxy S5 have outpaced that of its predecessor, the S4, in the U.S. as well. Despite the lack of any eye-popping technology, the enhancement of essential features seems to be appealing.

WSJ: What software are you focusing on besides Tizen [co-developed with Intel Corp.]?

Mr. Shin: Inside the Galaxy S5, there are improved hardware and software capabilities. To bring better camera capability, we designed the camera sensor and also the chip to process signals. Bringing faster download speeds as well as the heart-rate monitor in the Galaxy S5 are examples of how we try to improve our smartphones.

WSJ: What other areas are you most focused on these days?

Mr. Shin: Smartphone penetration is already high in many developed markets and we're entering a period of low growth. We need to look at new markets such as Africa. In Africa, Samsung is gaining some ground.

WSJ: How do you think smartphones will evolve?

Mr. Shin: Flexible displays [using bendable screens as material to make the smartphone curvy or have bendable sides] are one of the many ways to innovate. But we cannot comment on any future product plans. And there will be expanded adoption of applications for measuring other various body metrics beyond the heart rate.

Mr. Shin: We want to make sure that all the elements are in place. Tizen was first used in our wearable devices and we want to use it to connect with the various devices that we have, like cameras, vehicles and appliances.

WSJ: Would you consider using Tizen as an operating system for future tablets?

Mr. Shin: There are no plans yet. We plan to continue to use Android for our upcoming tablets.

WSJ: Samsung hasn't made much headway in tablets and lags behind rivals. What are you going to do about it?

Mr. Shin: I revealed our 40 million tablet sales goal at an analyst conference back in November last year. Our tablet sales exceeded that target in 2013. We made an aggressive goal this year, too, and we're working hard to achieve it. We are now preparing another lineup of premium tablets. We plan to hold a launch event for the new tablets in New York for the first time since the U.S. is a big market for us.

WSJ: How has the reception been for Knox [Samsung's mobile-phone software for businesses]? Have you signed contracts?

Mr. Shin: We're doing trials with various financial institutions and governments around the world. I cannot divulge more details about the contracts, but we have paying clients.

WSJ: Samsung has about $60 billion in cash. Would you look to participate in the mobile-phone industry consolidation? What about buying South Korean mobile-phone maker Pantech?

Mr. Shin: There has already been some industry consolidation. I cannot comment further.